Adjusting age bands: Justified shift, or shaft?

By Heather Stauffer,
January 3, 2013 at 8:00 AM
- Last modified: January 3, 2013 at 8:54 AM

Heather Stauffer

William Wordsworth once described being young as “very heaven!” — but come 2014, it's looking as if it's going to be less heaven, for both the young and those who employ them.

The reason: Age band adjustments, which per the Patient Protection and Affordable Care Act will not allow insurance companies to charge the elderly any more than three times what they charge the young for the same coverage — an age band of 3:1.

Exactly what that means monetarily depends on who you ask, but there are a lot of voices saying that in individual and small-group markets, premiums for young people are going to spike. AHIP predicts that the age band adjustment alone will increase a 24-year-old's premium 45 percent from $1,200 to $1,740 annually, while a 60-year-old's premium will decrease 13 percent, from $6,000 to $5,220 annually. However, the Kaiser Family Foundation predicts that the age band changes will be bigger in the individual market than in the small-group one.

The age band adjustment is just one of the changes that 2014 will have in store for insurance, as PPACA narrows the list of factors that insurers may consider to exclude pre-existing conditions, health status and gender; insurers are required to meet essential health benefits and minimum actuarial value standards for some plans; several new taxes come into play; and individuals and small employers gain the ability to purchase insurance via exchanges.

Forbes.com quoted Aetna Inc. CEO Mark Bertolini on what effect he expects those changes to produce: "Premium rate shock for 2014, absent subsidies and everything else, is going to be in the neighborhood of 20 percent to 50 percent. And we're going to see some markets (and) in sub-segments in some markets go as high as 100 percent."

By contrast, the Commonwealth Fund, issuing a recent historical overview of premiums, made no mention of impending spikes but opined that, long-term, "The Affordable Care Act's reforms should begin to moderate costs while improving coverage."

OK, back to the issue of youth. Age banding isn't the only pertinent health insurance issue: There's also the much-touted "You can stay on your parents' insurance until you're 26!" provision that has been in effect for a while now (I recently stumbled upon this article by a Carlisle resident on the subject), and the stipulation that people under 30 may purchase what will essentially be catastrophic-only coverage on the exchanges.

How effectively those factors counterbalance the age band restriction, I don't know. But putting them aside, I as a young person have a hard time not seeing age-band restrictions as a win for previous generations at the loss of my own and future generations. And we have quite a few of those already.

AHIP didn't mention that specifically, but it did note a related concern: "If the younger individual's premium becomes unaffordable, they will choose not to purchase coverage. If young, healthy people drop health insurance coverage, premiums rise for everyone."

Also of interest on the subject of exchanges: The observation by Pennsylvania Democrats that Americans for Prosperity tweeted praise for Corbett for not choosing a state-run exchange before Corbett's official announcement.

AFP, which publicly congratulated itself on "blocking the healthcare exchange in Pennsylvania," cancelled its plans to rally Dec. 13 following Corbett's announcement.

Please note that saying "no" to a state-based exchange does not, as things currently stand, mean that Pennsylvania won't have an exchange — just that the exchange it has will be run by the federal government instead of the state.

You wouldn't necessarily be able to tell that from the arguments that opponents of a state-based exchange advanced publicly, although I've seen a few in the vein of "costs will go up, and whoever is running the exchange will be blamed for it, and wouldn't you rather have that be the federal government?"

One significant undercurrent in the issue, explained well here, is the issue of whether subsidies will indeed be available for federally run exchanges. The official word is that of course they will be, but opponents of the PPACA have not all entirely abandoned hope that the courts will hold with their reading of the law, which is that it authorizes subsidies only for state-run exchanges. In that scenario, the argument goes, a federally run exchange could mean no subsidies and in turn possibly no employer or individual mandates.

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Finally, this is from last year and mostly about next year — but nonetheless a valuable summary for employers.